According to Inside Defense, the US military revoked the invitation because of Beijing's aggressive actions in the South China Sea, which have recently included reports that it quietly installed "defensive" missiles capable of striking US territory in the Spratly Islands. More than 20 countries, 40 ships, 200 aircraft and 25,000 personnel are expected to participate in the exercises.

As the WSJ notes, China’s inclusion in the previous two Rimpac exercises was among the most tangible results of an effort by both sides since late 2010 to stabilize military ties that had often been interrupted by China over American arms sales to Taiwan.

The U.S. decision to revoke the invitation is likely to heighten tensions between Beijing and Washington amid fraught negotiations that aim to avoid a trade war.

“I think throwing them out of Rimpac would be a major political statement,” said a Senate staff member who follows the issue closely.

The US said it has "strong evidence" that China deployed anti-ship missiles, surface to air missiles and electronic jammers in contested parts of the Spratlys. The US called on China to remove the items.

"The United States is committed to a free and open Indo-Pacific," the Pentagon states. "China's behavior is inconsistent with the principles and purposes of the RIMPAC exercise."

The Pentagon asserts it has "strong evidence" that China has deployed anti-ship missiles, surface-to-air missile systems and electronic jammers to contested areas in the Spratly Islands region of the South China Sea.

"China's landing of bomber aircraft at Woody Island has also raised tensions," according to the Pentagon, referencing China's largest military outpost in the South China Sea.

[...]

"We have called on China to remove the military systems immediately and to reverse course on the militarization of disputed South China Sea features," the Pentagon states. "We believe these recent deployments and the continued militarization of these features is a violation of the promise that President Xi made to the United States and the world not to militarize the Spratly Islands."

The decision also comes as trade negotiations between the US and China are apparently unraveling, with President Trump telling the US not to expect a deal right away.

Meanwhile, China says its developments on the islands are only meant to "ensure safety at sea, navigation assistance, search and rescue, fisheries protection, and other non-military functions the placement of these weapon systems is only for military use," according to the Pentagon.